Energy Prospectus

Opening Prices:
> WTI is down $1.33 to $69.93/Bbl, and Brent is down $1.12 to $71.77/Bbl.
> Natural gas is up 4.1c to $3.976/MMBtu.

Delta variant surge continues to pressure oil prices lower.

AEGIS Notes
Crude Oil

Oil prices slide before the market open on Tuesday as the delta variant continues to pose a risk to demand
WTI fell 2.25%, after slumping by the most in two weeks on Monday
Residents in Beijing were advised not to leave the capital, and flights are being canceled due to a resurgence in viral cases (Bloomberg)

BP’s CEO Benard Looney said, “We are seeing probably a slight muting of demand globally, but I’m talking about a very slight muting of demand at this time”
BP followed other oil majors and is increasing dividends and share buybacks as higher oil prices boosted profits (Bloomberg)
Big Oil, except for Exxon, are raising returns as they paint a brighter picture that the worst of the slump caused by the coronavirus is over
If oil averages about $60/Bbl, BP expects to be able to continue increasing its dividend by about 4% annually and repurchase $1 billion of shares each quarter until 2025, Looney said

Natural Gas

Whistler Natural Gas Pipeline enters commercial service
The 450 mi. pipeline will move nearly 2 Bcf/d from the Permian Basin to Agua Dulce Hub near Corpus Christi, Texas
The pipeline will enable Permian producers to gain access to Gulf Coast industrial and export markets including LNG < This is bullish news for all of our Permian Basin companies as differentials for West Texas natural gas and NGLs have almost disappeared.

Prompt-month gas (Sep ’21) is up by 4.1c at $3.97 this morning as weather forecasts continue to shape up
The recent increase in CDDs has added bullish sentiment regarding gas prices, and the end of season storage trajectory
With hot weather expected to continue through the middle of August, the draw on gas for power generation will complicate the storage deficit situation and may leave the U.S. with unhealthy levels, entering the winter season < Shaping up to be the "Mother of all Bidding Wars" for gas supply in Q4.

NG is soaring 4.04 now, up 10.7 cents

WTI back over 70.00, up 1.20 from todays low

Dan

I’m not understanding the notion that it will be a bidding war for natural gas. I understand the concept of supply/demand with a scarce resource, but since the storage numbers are published weekly, why wouldn’t the utilities see this coming and lock in with hedges now, and in so doing, reduce the volatility in the winter?

Go to this website https://tradingeconomics.com/commodity/natural-gas and pull up a 25 year chart for natural gas prices. It will give you an idea of how rapidly natural gas prices can spike during a cold winter.

During Winter Storm Uri, spot market prices shot up to over $50/mcf in some regions. When I was at Hess we sold gas into the NYC market for over $60/mcf during a cold winter spike.

Utilities are required by law to maintain pressure in the residential gas supply lines. They will pay whatever price is necessary to get the supply. LNG exporters also have supply contracts to fulfill.

I'm sure that the utilities and LNG exporters do see the shortage that is possible this coming winter which is why we have ngas over $4.00 today despite the fact that we have plenty of gas today. It would take BIG BUCKS for utilities to go into the futures market and secure all the gas that they might need during the winter now. If we have a mild start to winter, they could get killed if they are caught long with too many futures contracts. Actual gas prices can be passed on to consumers, hedging losses cannot be passed on as easily.

"Natural gas futures traded around $4 per million British thermal units, close to 31-month highs of $4.1 hit on July 26th, supported by strong demand for US exports of liquified natural gas as global gas continues to trade above US prices. Natural gas prices in Europe rose to near $14/MMBTU for the first time on record while in the UK cost was also near $14/MMBTU, the highest since 2005. In Asia, the spot price of LNG climbed above $15/MMBTU. Buyers in Europe have struggled to replenish tanks that are at the lowest for this time of year in a decade and Russia is limiting exports to the continent. Also, Brazilian imports surged to record levels as droughts added to the competition by curtailing power output from hydroelectric dams." - Trading Economics 8-3-2021

US Natural Gas prices are primarily set by regional supply/demand fundamentals, but as LNG exports keep rising so will the impact of global gas prices on the US market. We are more "energy inter-dependent" each year.